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FDI, Trade and Integration in Mercosur


  • Castilho, Marta
  • Zignago, Soledad


In the 90’s, the Mercosur countries experienced a strong growth of trade and foreign direct investment (FDI). To examine the relationship between FDI, trade and regional integration in the Mercosur, we tested different disaggregated gravity equations on trade and FDI flows between two Mercosur members – Argentina and Brazil – and their partners during the 90’s. Our results attest a strong relationship between FDI and imports, but a weak and negative linkage between FDI and exports. This reinforces the perception that the investment flows into the Mercosur countries has generated strong flows of imports without generating exports. Another important result is the relevance of Mercosur in multinational firms strategies that seems to be different depending on the country where the firm is located. Firms installed in Brazil give an importance to the regional market while the firms installed in Argentina, assume that regional market is not a relevant issue.

Suggested Citation

  • Castilho, Marta & Zignago, Soledad, 2002. "FDI, Trade and Integration in Mercosur," MPRA Paper 43886, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:43886

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    References listed on IDEAS

    1. Blomström, Magnus & Kokko, Ari, 1997. "Regional Integration and Foreign Direct Investment," CEPR Discussion Papers 1659, C.E.P.R. Discussion Papers.
    2. Motta, Massimo & Norman, George, 1996. "Does Economic Integration Cause Foreign Direct Investment?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 757-783, November.
    3. María Inés Terra & Marcel Vaillant, 1998. "Política comercial y política de infraestructura: un ejercicio de simulación de los impactos regionales en el MERCOSUR," Documentos de Trabajo (working papers) 0797, Department of Economics - dECON.
    4. Antoine Bouët, 2000. "La mesure des protections commerciales nationales," Working Papers 2000-15, CEPII research center.
    5. Norman, George & Motta, Massimo, 1993. "Eastern European Economic Integration and Foreign Direct Investment," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(4), pages 483-507, Winter.
    6. María Inés Terra & Adriana Gigliotti, 1994. "Mercosur: localización de la producción. Un modelo de geografía económica," Documentos de Trabajo (working papers) 0794, Department of Economics - dECON.
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    Cited by:

    1. Achabou, Mohamed Akli & Tozanli, Selma, 2007. "Mise en application de l'accord d'association UE- Algerie : les conséquences sur l’industrie sucrière algérienne," 103rd Seminar, April 23-25, 2007, Barcelona, Spain 9408, European Association of Agricultural Economists.
    2. Florence Eid, 2003. "Foreign Direct Investment in The Arab World: Creating The Missing Link," Working Papers 0309, Economic Research Forum, revised 03 2003.
    3. José Vicente Blanes Cristóbal & Juliette Milgram Baleix, 2006. "Impacto de la liberalización comercial de Marruecos y de la inmigración marroquí sobre las exportaciones de las CCAA españolas hacia Marruecos," Economic Working Papers at Centro de Estudios Andaluces E2006/14, Centro de Estudios Andaluces.
    4. Mamadou Camara, 2002. "Les investissements directs étrangers et l'intégration régionale : les exemples de l'ASEAN et du MERCOSUR," Revue Tiers Monde, Programme National Persée, vol. 43(169), pages 47-69.
    5. José V. Blanes & Juliette Milgram Baleix, 2006. "The Free Trade Agreement Morocco-EU: a simulation of the impact on EU exports," ThE Papers 06/09, Department of Economic Theory and Economic History of the University of Granada..
    6. Leandro Rothmuller, 2003. "Does FDI Matter for Trade in Brazil? An Application of the Gravity Model," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31th Brazilian Economics Meeting] c71, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].

    More about this item


    FDI; International Trade; Regional Integration; Mercosur;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade


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